Ask the Mortgage Experts

Capital Raising on main residence

I own (outright) a home with an approximate value of 230,000. Can I borrow against this to purchase a buy to let property with a value of approximately £140,000?

The rental monthly income would be a minimum of £650.00. I am 64 so will not have salary earnings after next year.

Brian,

You need to think carefully before borrowing against your home for what is in the end a speculative investment. If for any reason you were unable to meet the mortgage payments it would be your main residence that would be threatened with repossession and could ultimately leave you homeless. Imagine this scenario: You let out the property and the tenants trash it completely and don't pay their rent. The property would need renovating before it could be relet or lived by yourself, you would have no additional income coming in and all the while the mortgage would have to be paid.

If however the mortgage was secured on your BTL property the worse that could happen is that this property was repossessed, you lose your initial investment and damage your credit rating.

No Lenders want to see this happen to one of their borrowers and so they like to see that you will have sufficient income into retirement to cover any rental voids. If you will have no salary earnings next year you will be required to show that you have alternative sources of income.

Looking at the projected rental income, I do not think this will cover the mortgage you are looking to raise and so it might be that you have to split the mortgage over both properties. In this instance I would raise the maximum possible on the BTL and have just a small mortgage on your home.

I believe you would benefit from speaking to one of our independent mortgage advisers. Please call on 0344 346 3672 and tell the consultant the date of your question, they will be able to look at your situation and advise you accordingly.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

Call us on 0344 346 3672

Stay connected....

Legal

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT.

John Charcol is a trading name of John Charcol Limited and its Appointed Representatives. John Charcol Limited is authorised and regulated by the Financial Conduct Authority. The Financial Services Register number is 665649. Registered in England No. 9157892. Registered office address for John Charcol Limited is 5th Floor, Cutlers Exchange, 123 Houndsditch, London, EC3A 7BU. The FCA does not regulate some investment mortgage contracts. Calls may be recorded for training and monitoring.